Top 5 forex trader mistakes
TOP 5 FOREX TRADER MISTAKESMany traders work hard to become knowledgeable and skilled in fundamental analysis and charting. These are important skills. Yet many traders fall victims of ordinary trading mistakes that lead to financial loss. Below are the five most common mistakes made by traders? Read them carefully and avoid making them yourself.
1) failure to use stop loss order. a stop loss order is a preset order that will automatically close a trade if the currency pair reaches a certain price.this is a risk management two that prevents large losses.why don't traders use stop loss orders? First, the trader is over eager to enter the trade and/ or to confident in the success of the trade. second, some traders don't trust stop orders. Perhaps the traders has been stooped out of a trade only to watch it retrace and then clos in the positive. This type of whipsaw action by a currency can be discouraging, but it can be also be manage. Failing to use stop orders leaves the trade (and the trader) open to quick and large losses.
2) failure to us limit orders: a limit order is a pre-set order that automatically closes the trade if the currency pair reaches a certain level. On like the stop loss order, the limit order sources the profit. Why would a trader avoid using an order that will lock profit? Many traders are concern that the limit order will cut the profits of a successful trade by forcing the trader to take profit too earlier. Hence, the trader will miss out on even higher profits. But trades can reverse and a profitable trade can quickly turn into a loosing trade. Remember, you never loss money taking a profit.
3) using too much margin: the large amount or margin and leverage that is available in forest causes some traders to over-extend themselves in a single trade. More leverage means the possibility of higher losses, so the trader is vulnerable to incurring losses quickly and exponentially. Another result is that the trader will not have enough margins available for other traders.
4) trading too many lots: a lots is a basic trading units in forex. The number of lots that a person can trade at one time is limited only by the money and margin available in the account. The problem is that many novice traders become overly excited and start trading with ten or more lots. Even two lots could be considered excessive for beginning traders. Trading a single lot is a prodent way to begin trading. If your trading system advocate for you to start trading with more than two lots, find another system.
5) failure to place a hedge trade: a hedge trade is a separate trade that moves in the opposite direction of the primary trade. Why should a trader use a hedge trade? To make a profit regardless of how a currency pair moves. Yes, using a hedge trade will reduce the overall profit. However, it will also increase your chances of making a profit on the currency pair.
THE BEST TIME TO TRADE
The forex market is unique in that it is open for 24 hours a day from Sunday to Friday. But do experience trader sit in front of their computer through ou the day and night trading currencies? Of course not! They focus on the best trading times for each currency. This may be for only four hours a day. Sometimes, it might be only two hours. Experience traders-especially day traders and swing traders are looking for high volatility and volume. They want strong and reliable trends and solid price movement. Investors are also looking for good trending currencies, but focus more on long-trends. These criteria are usually met during a small window for each trading day. Here's an example; the euro is one of the most traded stocks in the word. This young currency is the focus for many individual traders, but also for large financial institutions and even governments. It is a great currency for beginning traders. If you dare to get your wet you must know what is best time to trade the euro. This is during European section, which runs from 2am to 12pm [ET] every day with peak time between 8am and 12pm ET if you don't want to focus only on the euro, there are a few hours each day that are the best trading days for most of the major currencies. This , there are a few hours each day that are the best trading days for most of the major currencies. This period is known as the power hours. So spend your trading time wisely and reap the rewards. More free time and potentially higher and quicker profit.
WHAT'S YOUR TRADING STYLE
when people talk about style, they are usually referring to some thing personal. For example, they might mention your hair style or a style of cloths. Many writers are familiar with element of style by struck on the white. How often are you asked about your trading style?! This is actually a very important question for traders to ask themselves. There are so many different trading style as many as there are traders but many traders are not aware of their trading style or its importance. There are basically three styles of trading although traders tends to adapt the style of their goals, personal commitment and life style. (oh, that's another style) the three styles of trading include:
1) day trading
2) swing trading
3) long term
what is different among this three styles? Good question, but there is a long answer to these simple question. In short the difference center on the (1) length of time a position is kept open and (2) the fundamental and or technical tools employed. Before deciding which style of trading you prefer, you should consider the most important factors that influence your trading time and money. That can help you decide on your trading style.
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